Let Chaos Reign: Experiment Early—And Often

Once you have identified a strategic inflection point, the key to dealing with it effectively is to "let chaos reign," says Grove. It is important for organizations to experiment in multiple directions so that they have the power to respond to a strategic inflection point. To put it in more dire terms, if you're not already trying all kinds of new things all of thetime, it may be too late to start when the 10x change hits you. So it is essential that you experiment constantly with new products, new technologies, and so on:

The dilemma is that you can't suddenly start experimenting when you realize you're in trouble unless you've been experimenting all along. It's too late to do things once things have changed your core business. Ideally, you should have experimented with new products, technologies, channels, promotions, and new customers all along.

If an organization builds experimentation into its everyday business, it will have options available when a 10x change occurs. This is particularly important now, Grove asserts, as the Internet is emerging as everybody's strategic inflection point.

When an SIP arises, it is up to management to choose a clear path and take decisive action. This means (1) exhibiting an unwavering commitment to righting the ship, and (2) providing sufficient resources to accomplish that end. Under Grove's leadership, as noted, Intel's "ship" was righted on more than one occasion, and the company returned the resources invested in it many times over. By the time Grove stepped down as CEO in 1998, Intel was a $26 billion juggernaut delivering more than $6 billion in annual profits.

Here are some historic examples of events that have presented a strategic inflection point to one or more industries:

THE INVENTION OF THE MASS-PRODUCED AUTOMOBILE. When Henry Ford's first Model T rolled off his revolutionary "assembly line," it presented a strategic inflection point not only to the horse-and-buggy business, but also to the coach makers who were still making "horseless carriages" more or less by hand.

THE BIRTH OF AIR FLIGHT. The Wright brothers' invention led to airmail and air travel, siphoning off first mail and later passengers from the railroads.

A NEW COMPETITOR. Amazon.com went live in 1995, taking a significant bite out of the market share of traditional bricks-and-mortar bookstore chains like Barnes & Noble.

THE ARRIVAL OF ONLINE TRADING. In the late 1990s, online brokers such as E*Trade and Ameritrade offered investors the chance to trade stocks at a fraction of the cost of traditional brokers like Merrill Lynch, turning the brokerage industry upside down.

What Would Andy Grove Do?

Returning to the case that opened the chapter, it should now be clear that your company was faced with a strategic inflection point when the supplement manufacturer started to steal market share. There are several similarities between this case and Intel's battle with the Japanese in the memory market in 1984. In both instances, the CEO underestimated the competition. None of the senior managers at Intel felt that the Japanese could marginalize Intel's memory business, and the same is true in this case. You didn't take the supplement manufacturer seriously, nor did you prepare the organization for the decline in its lead product.

So what do you do now? What would Andy Grove do? In this particular example, unfortunately, it may be a case of too little too late. Andy Grove would never have allowed the firm to become so vulnerable. He would have made sure that the company was experimenting with new types of drugs all along, keeping the drug pipeline full. He would have canvassed people lower down in the organization, knowing that the senior managers are often the last to know something. He would have listened to the "helpful Cassandras," who in your organization would have included the young researcher out of MIT. He would have encouraged vigorous debate, and he probably would not have dismissed the supplement alternative so quickly.

Had the company taken these measures, it would probably have more options than it does now. At this point, it appears almost too late to turn things around. Since your core business is fading, your only hope is to take the company in a new direction. Somehow, some way, you have to chart a new course for the company.

And there's always hope. Says Grove:

When you are in a strategic transformation, you get kind of lost. Part of you wants to retreat back to doing what you know how to do, because it's familiar.... But your intellect tells you that's not really where you want to be. So you strike out in a new direction....You have to feign more confidence than you feel, and you have to be convincing enough and courageous enough that you can affect the rest of the organization to follow you. You can course-correct as you go.

Most likely, your best chance of following Grove's model is to come up with a new drug or series of drugs that may prove to be your equivalent of the microprocessor. Keep in mind that Grove himself did not believe in the microprocessor in its early years. (In fact, he called it a nuisance.) If your firm has many "hooks in the water," perhaps it will come up with something that will turn things around. But discovery, development, refinement, and ultimate FDA approval take years, not months, and this will make it very difficult for your company to find its way out of the valley of death.